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This paper aims to examine whether traditional accounting information has lost its relevance in the context of sub-Sahara Africa. Specifically, the study examines whether…
This paper aims to examine whether traditional accounting information has lost its relevance in the context of sub-Sahara Africa. Specifically, the study examines whether historical cost and inflation-adjusted data are related to the market value of equity and stock returns on the Ghana Stock Exchange (GSE).
The authors collect firm-specific data from annual reports of 20 listed firms from the GSE over the period 2007-2012. The authors use ordinary least squares and two stage least square (2SLS) to examine the value relevance of historical and inflation-adjusted income and equity.
The results suggest that the market equity is related to both historical-cost and inflation-adjusted earnings. Market return is also associated with both historical-cost and inflation-adjusted earnings and book value. Overall, the authors conclude that inflation-adjusted information content is more value relevant than the traditional cost accounting information.
The findings are a wake-up call to policymakers and practitioners in formulating financial reporting policies. This study, however, focuses on only non-financial listed firms on the GSE. Thus, the results may not be valid for all companies in Ghana.
The finding has an implication on the choice of valuation used in the preparation and reporting of financial statements. Accordingly, the authors offer policy directions to financial reporting regulatory authorities to enhance the value relevance of accounting information.
Regulators, especially the GSE may improve life of investors if the recommendations are transformed into directives that will help enhance the quality of financial reporting.
The findings suggest that inflation-adjusted data are more relevant in countries with extreme inflationary trend and lax International Financial Reporting Standards compliance enforcement. The results also lend support for the current cost accounting theory.
Introduction The debate on accounting for inflation has dwelt, almost wholly, on the presentation of published accounts, ignoring the implications for management accounting…
Introduction The debate on accounting for inflation has dwelt, almost wholly, on the presentation of published accounts, ignoring the implications for management accounting. This is surprising really. The distortions which inflation brings to our measurements are more immediate and decision‐affecting than the once a year public relations exercise of the annual accounts. The subject did get an airing in the Guidance Manual to ED18 but even there it was a technician's manual with no examination of the wider effects. This article (which has no academic pedigree) examines the effect of inflation on the compilation, presentation and interpretation of management information in the multiple retail food industry, i.e. in supermarketing. While not sharing the profundity of the learned debate on ED18 and Hyde, it deals with matters which immediately affect the company's health and where it most certainly does matter that inflation is reckoned with. Accountants in industry and commerce know they must account for inflation in their management accounting—a certainty of purpose lacking in our options in the published accounts. Perhaps if there was more discussion on how inflation affects day to day management decisions—and thereby how it is worked into the information leading to these decisions—then the whole debate might be a bit more real, and not as seems to many accountants in industry, on the edges of their accounting responsibilities.
The efforts to find a generally acceptable answer to the problem of accounting for inflation continue unabated. The purpose of this article is to suggest that the answer…
The efforts to find a generally acceptable answer to the problem of accounting for inflation continue unabated. The purpose of this article is to suggest that the answer may lie in recognising inflation as an historical fact which should be and ought always to have been recorded as such in the books and accounts of all businesses. I cannot help feeling that had Luci Pacioli been alive he would have approved and indeed that had he been faced with this curse of modern society he would have incorporated an inflation adjustment in his basic book‐keeping records.
This paper investigates distortions in financial statements that arise from employing capital assets. Use of historical cost depreciation tends to overstate earnings…
This paper investigates distortions in financial statements that arise from employing capital assets. Use of historical cost depreciation tends to overstate earnings because of inflation effects, which in turn misrepresents firms' capacities to expand operations or to distribute dividends. We argue that the financial statement effects of inflation can be traced to two main sources: understated depreciation, and interest expense. Depending on a firm's capital structure choices, the distortion from historical cost depreciation is heightened or mitigated. Measurement errors in accounting numbers obscure the relation between price and earnings. We develop value relevant adjustments that enhance the informativeness of earnings. We also show that the effects of measurement errors from using historical cost depreciation are most pronounced in firms that carry lower levels of debt.
It may be instructive to examine the reaction of the accounting profession to the inflationary phenomenon in the ten countries in which tentative or final positions have…
It may be instructive to examine the reaction of the accounting profession to the inflationary phenomenon in the ten countries in which tentative or final positions have been taken. The record is curious indeed.
I It may be instructive to examine the reaction of the accounting profession to the inflationary phenomenon in the ten countries in which tentative or final positions have…
I It may be instructive to examine the reaction of the accounting profession to the inflationary phenomenon in the ten countries in which tentative or final positions have been taken. The record is curious indeed.
The knowledge and practice that are known as accounting are little more than a complex series of conventions. The accounting historian, or researcher, or practitioner…
The knowledge and practice that are known as accounting are little more than a complex series of conventions. The accounting historian, or researcher, or practitioner, cannot turn to any original authoritative source for confirmation or clarification on basic points of principle. To the financially untrained observer all talk of an unstructured and flexible foundation to accounting must seem to be at odds with the precision and authority with which he sees financial statements being presented to the reader, be he shareholder, banker or manager. Profit and loss accounts and balance sheets look so beautifully cut and dried, so obviously “right”. Well of course they are, but that is only because accountants have adopted and refined conventional procedures to produce such tidy statements. There is nothing unarguable or sacrosanct about accounts—absolutely nothing.
The purpose of this paper is to examine the challenges faced by an Australian accounting academic, R. J. Chambers, in the 1950s, in breaking into the accounting research…
The purpose of this paper is to examine the challenges faced by an Australian accounting academic, R. J. Chambers, in the 1950s, in breaking into the accounting research community, at that time, almost entirely located in the USA and the UK. For academics outside the networks of accounting research publication in these countries, there were significant, but not insurmountable obstacles to conducting and publishing accounting research. We examine how these obstacles could be overcome, using the notion of “trials of strength” to trace the efforts of Chambers in wrestling with intellectual issues arising from post-war inflation, acquiring accounting literature from abroad and publishing his endeavours.
The article uses actor-network theory to provide an analytical structure for a “counter-narrative” history firmly grounded in the archives.
Documents from the R. J. Chambers Archive at the University of Sydney form the empirical basis for a narrative that portrays accounting research as a diverse process driven as much by circumstances – such as geographical location, access to accounting literature and personal connections – as the merits of the intellectual arguments.
Although the historical details are specific to the case being studied, the article provides insights into the challenges faced by researchers on the outside of international research networks in achieving recognition and in participating in academic debates.
The findings of this article can provide guidance and inspiration to accounting researchers attempting to participate in wider academic communities.
The article uses documents from perhaps the most extensive archive relating to an individual accounting academic. It examines the process of academic research in accounting in terms of the material context in which such research takes place, whereas most discussions have focussed on the underlying ideas and concepts, abstracted from the context in which they emerge.
Long term inflation has forced accountants to examine traditional accounting techniques. Old historical cost methods are giving way to inflation pegged accounting. Yet inflation accounting raises problems for management. Chris Phillips investigates.
At the present moment in this country, and it is inflation in this country that immediately concerns us, we are all aware of constantly increasing prices. There are two ways in which the change in prices is measured by the Government statisticians. The best known measure is the Index of Retail Prices which covers the main goods and services on which householders spend their money. Certain non measurable items are not included but the index does give the average change in prices of the items on which the index is based weighted according to their importance in household expenditure in the previous January. In calculating these weights the expenditure of householders where the main income is a retirement pension or where the income of the head of the household is above a certain limit (£70 a week at present) is excluded.